|FM loses his shine|
|Saturday, 07 April 2012 00:00|
Politicians back jewellers, don’t want excise trail
Given that a very large proportion of the country’s black money, including of politicians, gets invested in jewellery, it’s not surprising that the political class is united behind the jewellers who have been striking against the budget proposals to levy an excise duty on unbranded jewellery as well. The jewellers, who called off their strike after 21 days, have enough clout to not just meet UPA Chairperson Sonia Gandhi who reportedly told them their demands would be considered, a Congress general secretary even announced the party had asked the government to consider their demands sympathetically. The jewellers also met the finance minister who must have given them enough assurances for them to come out saying they were happy with the deliberations, and later even call off the strike.
In itself, the tax isn’t anywhere as onerous as has been made out. Though the basic customs duty on standard gold has been raised from 2% to 4% (and from 5% to 10% on non-standard gold), this is unlikely to affect demand for jewellery which, despite gold prices shooting up, continues to soar, adding up to around $46 bn in 2011-12. A 1% tax is to be paid if transactions are above R2 lakh and paid for in cash. The 1% excise duty on unbranded jewellery, though on par with that on branded jewellery, is actually a lot lower since this is to be levied on just 30% of the transaction value declared in the invoice. In other words, while the tax impact itself is not that significant, what would be a lot more significant is the data trail that would emerge out of it. Excise duty collections of jewellers, for instance, would at some point be tallied with their cash collections; questions would then get asked on who was buying the gold, his source of income, and so on. That’s precisely the kind of things the taxman began doing several years ago by collecting data on credit card spending, foreign travel and so on.
On the face of it, the jewellers have said they are not worried about the tax per se as they are about the method of implementation and the likelihood that they will be harassed by tax collectors. While that is something that the taxman needs to deal with, surely the issue of harassment is something that is common to all taxpayers? When the finance minister does amend his tax proposals, not only will this be the budget’s first rollback, it will significantly affect his ability to track a huge outlet for black money transactions across the country.